Use the Holidays to Teach Kids These 4 Financial Lessons 

The mere mention of “the holidays” can elicit thoughts of dollar signs, credit card debt, and stress at the idea of overspending. And when kids are involved, those thoughts may multiply as quickly as compound interest.

If the thought of draining your savings account or spiraling into debt over a mountain of gifts sends you into a panic, you may want to rethink your spending habits this holiday season. In fact, it may be the perfect time to teach your kids about the value of money and how much that video game truly costs.

By educating your kids about how you make your financial decisions this holiday season, you can show them from an early age what it means to be a savvy shopper or a responsible spender. What’s more, it can teach them to be thankful for what they have and not give in to the glitz and glamour of holiday propaganda.

If you think your kids are ready for teachable moments this holiday season, here are four you can use to their benefit:

Lesson No. 1: Ditch the name brands

Whether you are shopping for gifts or everyday essentials at the grocery store, it’s easy to show children how to save money by going generic — or, better yet, finding equivalent products at a discount store. By showing them at a young age there is no shame in bargain hunting, you will instill a sense of fun in hunting for the best price.

There’s no need to run up your credit card or go into debt to buy items your children will love; the more reasonable options will often do just as well. While you might not be able to buy a fancy dollhouse or a child-sized kitchen at the discounted store, certain kinds of toys will be just the same, like dollar matchbox cars or coloring books.

Plenty of companies make offshoot products that are half the price (or less) than the name brand and effectively the same.

Lesson No. 2: Budget for next year

Honestly, it’s never too early to budget for the holiday season. Extra expenses are not limited to gifts; the extra food, alcohol, and travel expenses also add up.

The holidays are expensive all around, and as we know, the year always flies by. That’s why you can aim high by setting your savings goals now for next year, and use the planning as a way to teach your kids about money management.

Help your kids understand that it’s important to set money aside for large purchases — not just vacations or special items, but routine purchases that you make every year. If there is a big-ticket item they want this year but you can’t afford it, show them how they set their own financial goals and start saving for it now. While the topic of financial literacy may not be super exciting for them, helping them to identify a savings goal may make the challenge more fun.

For example: While it may not be fun to say, “No,” during gift-giving season, use the holidays as an opportunity to teach them about sinking funds and encourage them to create their own. Maybe if they agree to put $1 in their piggy banks each week, you can offer to match them dollar for dollar, or you can contribute a certain amount of money toward the final purchase as part of this year’s (or next year's) holiday gift.

Lesson No. 3: Gift a piggy bank

An obvious suggestion, but not one that is always top of mind during the holidays: give your kids a piggy bank. While piggy banks aren’t as exciting as the hottest new toy on the market or the latest video game, it is something they can use time and time again for as long as they want.

So while everyone you know is splurging on gifts for themselves and others that — let’s be honest — will likely be forgotten by February, why not give the children in your life the gift of financial responsibility? After all, that’s a gift that will last them a lifetime.

Lesson No. 4: Stay firm on quality over quantity

Don’t give in to your kids’ lists and demands for anything and everything their hearts desire. Make sure they know that lists are fun, but they shouldn’t expect all the toys they request during the holidays. Don’t let them set themselves up for disappointment.

Financial coach Brad Kingsley says it’s crucial to help children understand that dollar bills have limits:

“We set our daughter up with an allowance rather than buying things for her (outside of birthdays and Christmas). She would save her money to purchase things she wanted, but occasionally was short yet wanted something right away. Not coming in and paying the difference was a great lesson on delayed gratification. It helped her understand that sometimes you just don’t have enough money—and it’s okay to wait. Quite a few times she realized by the time she had the money, that she didn’t want to spend it all on that item she thought she previously wanted.”

Remember: financial education is a long game

Teaching your kids about holiday budgeting is never a lost cause. There will always be another birthday, holiday, or reason to celebrate. Using this time of year to teach your kids about making responsible money decisions will help in the long term while helping you keep control over your bank account.